Tax 'keeps firms out of Britain'

By Rachel Sylvester

12:00AM BST 04 Jul 2000

GORDON BROWN is "shooting Britain in the foot" with taxes and regulations that are deterring foreign companies from investing, according to a leaked internal memorandum from the Government's head of inward investment.

Andrew Fraser, chief executive of the Invest in Britain Bureau, called for the Chancellor to be more sensitive to companies suffering from the strength of the pound. In a paper for Stephen Byers, the Trade and Industry Secretary, he said he was "briefed to the teeth on defensive points" when he toured the world trying to persuade companies to invest.

Business leaders were concerned about the introduction of national insurance on share options. This "has angered particularly the new knowledge investors" - a group which the Government is trying hard to attract. Companies were also expressing disquiet about changes to double taxation relief, which business leaders had claimed could cost multinational firms billions.

The leaked memo said the climate change levy, designed to tax companies which pollute the environment, was also resented by business. Mr Fraser quoted David Jordan, whom he described as the "generally sympathetic chairman of Philips UK", as saying this levy is the Government's "most crass mistake".

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The memo also highlighted concerns about the National Institute for Clinical Excellence, the agency set up to decide which drugs should be prescribed on the National Health Service. The memo read: "This continues to arouse the suspicions of all our pharmaceutical investors.

"We can do better to avoid shooting ourselves in the foot on some measures. I am not suggesting that all Government policies should be instantly reversed to please inward investors. However, at a time of real pressures on manufacturing, it must make sense to be careful about the impact of new initiatives, especially from the Treasury, and be extremely sensitive over their presentation."

Michael Portillo, the shadow chancellor, said the Government's claims to be making Britain an "enterprise economy" were "risible". He said: "The remarks about the negative impact of Labour's stealth taxes on our economy reflect a very real consensus of opinion among small business, e-business and big business. Labour's new taxes, red tape and regulations are blunting Britain's competitive edge."